Vietnam Fails to Join 'MSCI EM'... Growth is 'ing'

[Asia Economy Reporter Hwang Junho] Although Vietnam failed to be included in the MSCI Emerging Markets, its growth potential has been recognized, and related exchange-traded funds (ETFs) continue to achieve soaring returns.

According to the financial investment industry on the 18th, Korea Investment Trust Management's Vietnam VN30 ETF recorded a weekly return of 2.89%. The Bloomberg Vietnam VN30 Futures Leverage ETF rose by 6.88%. Despite the MSCI Emerging Markets inclusion being canceled on the 11th, the profits have increased further.

An asset management industry official analyzed, "Due to institutional factors such as the ban on short selling, Vietnam did not make it onto the MSCI EM index watchlist, but this result proves that the long-term outlook as a market with significant growth potential remains valid."

Vietnam showed a growth rate of 4.48% in the first quarter. It is expected that a higher growth rate will be achieved once a new cabinet is formed through this month's elections. The World Bank and others forecast that growth in the 6% range is possible within the year. Despite the COVID-19 situation last year, Vietnam achieved an annual growth rate of 2.9%.

The trade disputes between the United States and China are also becoming an opportunity for Vietnam. Due to changes in the global value chain, Vietnam is emerging as a substitute for China. Vietnam has a young workforce, with 40% of the total population aged between 16 and 40, and low labor costs (average monthly manufacturing wage of $227). Additionally, Vietnam has fewer confirmed COVID-19 cases than other countries due to strong social distancing measures, and large-scale transportation infrastructure projects, such as the Long Thanh International Airport construction project started this month, are being sequentially carried out, which are also reasons why it is attracting investment.

The official forecasted, "Vietnam's consumer price index (CPI) remained below the government's target until the fourth quarter of last year, so accommodative monetary policy is likely to be maintained," adding, "The possibility of stock market adjustments due to inflation is very limited."